Woodford Equity Income - new 3 star rating

CF Woodford Equity Income is the first fund from star fund manager Neil Woodford’s new boutique, Woodford Investment Management. Woodford gained his reputation at Invesco Perpetual, where he worked from 1988 until April this year. He ran the Invesco Perpetual Income and High Income funds, achieving a Bestinvest MRI of 99.9% over a 25 year tenure.

Woodford made his name in the technology bubble of the late 1990s. Fledgling internet companies attracted stratospheric valuations on the promise of future growth, but he avoided them, sticking to his process and investing in cheaper, more mature and stable businesses. His stance resulted in significant underperformance in 1998 and 1999 which attracted strong criticism. However, Woodford stuck to his guns, and his investors were amply rewarded when the tech bubble began to deflate in 2000.

Woodford’s long-term record is one of the best in this or any sector. However, his success has attracted significant assets - at one stage he was running £33 billion at Invesco Perpetual. Such size makes it hard to invest in smaller companies, and his portfolios have increasingly focused on the FTSE 100. This move up the market cap scale has coincided with a slip in performance - his performance over the last five years has been middling, though this also reflects his cautious economic outlook and a typically conservative approach.

Despite his fresh start, Woodford will still be running a significant amount of money, perhaps £5 billion, from the outset. Though he will still invest in smaller companies, these are likely to form a small proportion of his portfolio and we expect his larger company focus to continue. As a result, his returns may not reach the heights of earlier in his career. We also have concerns over how he will operate without the backing of Invesco Perpetual, in particular his research team who are unable to join the new venture for the first few months. That said, his more cautious approach and strong track record still make his fund an attractive investment option.

The fund has been awarded a three star rating and will feature in our Premier Selection.

Please note the value of investments can go down as well as up and you may get back less than you originally invested. The yield figure is estimated, so not guaranteed. For an up-to-date forecasted yield after the fund has launched please contact Bestinvest.

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Past performance or any yields quoted should not be considered reliable indicators of future returns. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.

*This is the anticipated yield and the actual investment performance may be lower or higher than quoted.

The value of your investment can go down as well as up, and you can get back less than you originally invested.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.